Red Oak Hospital sues UnitedHealth plans, self-insured employers for embezzlement

Red Oak Hospital-17400 Red Oak Dr, Houston-Photo via Google Earth.

Red Oak Hospital in Houston has filed several lawsuits against companies and plans administered by UnitedHealth alleging embezzlement.

Red Oak claims self-insured or fully insured companies and their coverage plans administered by UnitedHealthcare have conspired to embezzle funds through a process called recoupment.

In total, recoupment has cost Red Oak about $8 million, according to Redoak General Counsel Ebad Khan.

One civil case filed in U.S. District Court in Southern Texas is against the Marathon Oil Company.

"There are over 100 unpaid claims involving self-insured plans administered by United that are reasonably related to the facts of the Marathon Oil complaint, which have resulted in approximately $8 million in recoupments/offsets from ROH (Red Oak Hospital)," Khan said.

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UnitedHealthcare, as the third-party claims administrator for Marathon Oil, is recouping, or offsetting benefit payments for alleged overpayments made in the past, according to Kahn. Claims are being denied for one patient if administrators believe they have overpaid in the past for the claim of another patient, Khan said.

"We never received the funds, we don't receive the funds," Khan said.

UnitedHealth is taking plan assets from a self-insured plan and using it to satisfy itself on overpayments it has made on its fully insured amounts, according to Khan. 

In one example, am employee of a fully insured plan had a procedure done and the claim was paid, he said. A year or two later, an employee of Marathon - which is self-insured - came in and UnitedHealthcare administrators determined they wouldn't pay the amount requested because the plan had overpaid on the first claim it paid two years earlier.

Khan claims this is improper.

"They're taking the money from the self-insured trust account and putting it in their own account," Khan said. "The plans are fiduciary under trust accounts; if it's not in the best interest of the plan, then they are in breach."

Unless exempted, self-insured health benefit plans are governed and regulated by the Employee Retirement Income Security Act of 1974 known as ERISA.

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Red Oak alleges that Marathon failed to manage the plan in the sole interest of its members, as required by ERISA.

ERISA prohibits converting plan assets to ultimately pay the plan's account, according to Khan.

Red Oak's actions have implications throughout the industry, according to Jin Zhou, president of ERISAclaim.com, in comments posted on PRLeap.

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"This is absolutely an unprecedented and multifaceted ERISA lawsuit with unpredictable impacts for all ERISA self-insured plans, all employer sponsored plan employees, and all healthcare providers, for resulting uncertainties for every healthcare claim," said Zhou, an expert on ERISA compliance and appeals.

Khan said he has filed lawsuits involving UnitedHealthcare plans against Marathon Oil, Gap Inc., and AT&T.  Red Oak has sued the plan, plan sponsor and the plan administrator.

The lawsuits are against UnitedHealthcare plans, but not the insurer itself, Khan said, though attempts to deal with the insurer have gone nowhere, he said.

UnitedHealthcare did not return a request for comment by the time of publication.

Red Oak is a small, four-bed, family-owned hospital that is known in its legal entity as Redoak.

Two weeks ago, Red Oak Hospital filed a similar lawsuit against Macy's and the plan administered by Cigna, according to Khan, who said he expects to file more complaints.

Twitter: @SusanJMorse